Britain’s artistic talent was all show and no business. Now the creative industries are seen as an engine of growth

Towering 20 metres high, the Seed Cathedral was impossible to miss.
Constructed from 60,000 strands of acrylic, each containing seeds from the
Millennium Seedbank at the Royal Botanic Gardens, Kew, it looked like a
giant dandelion. Even in the hustle and bustle of last year’s Shanghai Expo,
it stopped delegates in their tracks.

The Seed Cathedral was the centrepiece of the UK pavilion, which attracted
50,000 visitors a day at the expo. Thomas Heatherwick’s creation guaranteed
attention for Britain at an event attended by almost every country. It also
boosted the international reputation of our designers.

“It changed perceptions about Britain’s creativity,” said Sir John Sorrell,
chairman of the London Design Festival, who helped to select Heatherwick’s
project for the Chinese show. “It is easy to tell the story of manufacturing
or financial services, but the story of the creative industries is a bit
more complicated.”

For years, the creative industries have received little recognition for their
business acumen, even at home. Britain was renowned for the arts, and for
the sharp eye for talent that produced great music, television and films.
But a business? The people were in it for the love of their craft. It was
all show, and no business; a little airy-fairy, much like a dandelion head.

Not any more. When the coalition government reviewed its growth strategy last
November, the creative industries were one of six sectors that ministers
focused on for Britain’s future prosperity. In his March budget, the
chancellor announced the formation of a Creative Industries Council to
further the cause. Until now, each creative sector has had its own trade
body, so the industry has struggled to speak with one voice on important
issues such as copyright.

Some 14 years after Chris Smith, the culture secretary of the day, threw an
umbrella term over advertising, design, entertainment, publishing, software
and music, the impetus is once again with the creative industries and they
are enjoying a purple patch.

In films, The King’s Speech grabbed Oscar glory despite a tiny budget. In
music, for the first time since 1985, three British artists — Adele, Marsha
Ambrosius and Mumford & Sons — occupied the top three spots in the US
album chart in one week.

Simon Cowell is preparing to launch The X Factor in the US, where it will do
battle with American Idol, another talent show created by a Briton, in that
case Simon Fuller. Our language, culture and ideas sell so well that
numerous shows — such as The Office, Shameless and Skins — have been remade
for American television.

Taken together, the creative industries contributed £59.2 billion to the UK
economy in 2008, the last time figures were compiled. They accounted for
5.6% of the economy, up from 5.2% a year earlier, and had a higher share of
gross domestic product than in any other developed country. And they provide
2.3m jobs — 1.3m in the sector and 1m outside of it.

The industry seems to thrive in spite of the attentions of politicians, who
have returned to embrace it time and again. Tony Blair clinking glasses with
Noel Gallagher of the rock band Oasis at a Downing Street reception in 1997
became an emblem of both his prime ministerial honeymoon and the Britpop
era. Three years ago, Andy Burnham, the Labour culture secretary, unveiled a
plan to create thousands of apprenticeships. Now it is the coalition’s turn.

“In most countries, people respect Britain’s place in the creative world —
whether that is architecture, design, computer games or film,” said Ed
Vaizey, the culture minister. “It is obvious to support an industry where I
feel we are punching above our weight.” Despite this global reputation,
however, the UK has failed to create many large companies in the sector. A
significant number of the 182,000 creative businesses are small firms with a
handful of staff. Almost 30% of the 2.3m workforce are self-employed.

There are two solutions: attract more business talent into the sector, and put
more money into it. The government’s tax breaks for the film industry have
worked well, but it is reluctant to introduce something similar for computer
games makers.

“The greatest challenge is the access to finance,” said Vaizey. “It’s a
doubled-headed problem. The creative entrepreneurs are perfectly within
their rights to sell out when their businesses reach a certain level, but
the capital to acquire them often comes from America.”

The industry’s reliance on America is hard to break. In most cases, the
distribution networks — for television, music and film — are American owned.
The prospects for The King’s Speech soared when Harvey Weinstein, the
Hollywood producer, got on board. Of the three British music acts who topped
the US chart in March, only Adele, a graduate of the Brit School in Croydon,
is signed to a British label, EMI — which could move into foreign hands this
year.

Aardman Animations, the Bristol studio that is home to Wallace & Gromit
and Shaun the Sheep, has two feature films in production as part of a
three-picture deal with Sony. Arthur Christmas is due out in November and
The Pirates next year. Even the rights to Downton Abbey, the
quintessentially English period drama that was a hit on ITV1, are ultimately
owned by NBC, one of the big American television networks. The upshot is
that taxes — and wealth — flood out of Britain.

“We are good at originating content, but the people that are doing the
origination don’t have the capital to invest in their own creativity,” said
Patrick McKenna, director of Ingenious Media, a finance house whose funds
have invested in everything from the cinema hit Avatar to Creamfields, the
dance music festival. With more cash attracted to the sector, producers and
designers could afford to create a “slate” of films or collections, giving
them a chance to take a longer-term view, he said.

Another challenge is copyright. The rise of the internet has created
opportunities but also threats. Pirated content — music and movies — makes
it harder for media firms to get a return on their investment, and it
becomes even tougher as sales of DVDs and CDs slide.

“People are listening to more and more music but fewer and fewer are prepared
to pay for it,” said Fran Nevrkla, a former professional violinist who heads
the PPL, which collects royalties from broadcasts and public performances on
behalf of 50,000 musicians and songwriters.

The government’s response has been the Digital Economy Act 2010, an attempt to
reduce online piracy by cutting off broadband users who persist in sharing
illegal content. It is a controversial step. A judicial review lodged by the
internet providers BT and Talk Talk to block the legislation failed. They
argued that it invaded users’ privacy.

McKenna is more positive about the digital revolution, arguing that it is
helping British firms to distribute great music and television direct to
consumers. “They might be small businesses, but with the right level of
investment they could capture so much more value for themselves,” he said.

Coming soon is another government review of intellectual property by Ian
Hargreaves, professor of digital economy at Cardiff School of Journalism,
Media and Cultural Studies. It was launched at the insistence of David
Cameron, who has expressed concern that the current rules would have
dissuaded Google from starting up in Britain. But the prospect of looser
regulations has alarmed media firms, which fear copyright abuse.

Vaizey expects Hargreaves’ recommendations to plot a course somewhere between
“the belief that emerging businesses are coming up to steal content
and rights holders are dinosaurs who don’t understand the way of the world”.

Britain will continue to be a creative powerhouse. It just has to work harder
at making sure the fruits of its labour pay.

A snapshot of business

This weekend The Sunday Times publishes the fourth in a year-long series of
monthly supplements charting the rise of British business out of recession.

If Britain is to prosper, growth must come from business. Our supplements, in
association with Lloyds Bank Corporate Markets, take a detailed look at
individual sectors to provide an overview of their strengths and weaknesses,
and showcase companies that have flourished.

Today we examine the creative industries, an umbrella term that covers
everything from film and design to advertising and television.

A large part of the sector is software and digital, which we will return to
examine in another supplement later in the year.